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All of the large banks except ANZ have cut their term deposit rates by 10 to 50 basis points, moving in line with a fall in the 90 day bank bill rate in recent weeks in anticipation of a cut in the official cash rate (OCR) by the Reserve Bank on Thursday.

Westpac cut its 12 month term deposit rate by 30 basis points to 8%, while BNZ cut its 12 month rate by 50 basis points to 7.4%. ASB cut its 12 month rate by 20 basis points to 8.3%, while National Bank cut its 12 month rate to 8.25% from 8.5%. A full list of term deposit rates up to 1 year are here and 1 year and over are here.

However, the banks are not cutting their mortgage rates, having reduced their key two year mortgage rates by around 20 basis points in early June when the RBNZ indicated with its Monetary Policy Statement that rate cuts were coming.

ANZ National and BNZ have also warned in the last week that mortgage rates may not be able to be cut again because international funding costs have risen after the Credit Crunch returned with a vengeance in late June.

ANZ National recently raised US$2 billion at 240 basis points above the 5 year swaps rate and said not all of the recent funding costs had been passed on, squeezing bank profit margins.

However, term deposit inflows have been very strong in recent months as investors fly to quality from finance companies and a very weak share market. A slump in consumer spending is also likely to be driving an increase in savings rates, particularly into shorter term deposit and cash PIE accounts that are hoovering up savings because of the tax advantages on offer.

So with margins under pressure and natural demand for term deposits strong, the banks appear to be choosing to cut term deposit rates to reinstate their margins rather than hiking mortgage rates, where demand is weak because of the slumping housing market.

Kiwibank also cut its one year term deposit rate to 8.4% from 8.5%.

Tags: ANZ, ASB, BNZ, Kiwibank, National Bank, OCR, RBNZ, Term Deposits, Westpac

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This entry was posted on Monday, July 21st, 2008 at 1:17 pm and is filed under Term Deposit Rates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.